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EPA’s 2013 Proposed Rules under the Renewable Fuel Standard

On January 31, EPA announced two long-awaited actions proposing new rules under the Renewable Fuel Standard.

Proposed volume obligations for 2013

The major announcement on January 31 was EPA’s issuance of its long-awaited proposed rule setting the 2013 volume mandates for the fuel categories under the RFS. As described in earlier posts on my Advanced Biotechnology for Biofuels blog, the 2007 legislation that created “RFS2” established annual mandates through 2022, but it also gave some discretion to EPA, specifically, the obligation to set each year’s mandated volume for biomass-derived diesel, and the discretionary ability to revise the volume mandate for cellulosic biofuels, both of which would be implemented through the rule-making process. EPA had previously set the volume mandate for biomass-derived diesel, and in the proposed rule, EPA used its power under the law to revise the originally-specified mandate for cellulosic biofuel, based on estimates of 2013 production capacity. The proposed volume of 14 million gallons was a substantial reduction from the statute-set mandate of 1 billion gallons, but higher than the 8.65 million gallon threshold for 2012 that was not met through actual production of fuel last year.

The chart below shows the proposed volumes, along with the “percentage standard”, which is the ratio of each category’s volume to the overall nonrenewable fuel market, which is used to calculate the volume obligations for each responsible party under the RFS. It is important to remember that the categories are nested: the fourth-listed category of “renewable fuel” represents the total of all fuels covered by the RFS, and the “advanced biofuel” category encompasses both “cellulosic biofuel” and “biomass-based diesel”.

EPA did not seem unduly influenced by the recent Appeals Court decision vacating the 2012 cellulosic standard, and the agency applied the same methodology for setting the cellulosic mandate as it did in previous years. However, as noted in today’s Biofuels Digest, the agency was somewhat more conservative in basing the volume mandate on its estimate of actual cellulosic fuel production for the year, rather than its estimate for what the total (annualized) capacity of cellulosic fuel production will be by yearend. It is widely expected that 2013 will be the first year where there is substantial production of ethanol and other fuels from cellulosic feedstocks, and so EPA’s projections seem to be achievable. The agency did not revise the overall volume mandates for the year, consistent with its prior position that other fuels qualifying as “Advanced Biofuels” (e.g. sugarcane ethanol, biomass-derived diesel) will be produced and used in sufficient volume to make up for the reduction in the cellulosic biofuel mandate – an approach that was validated by the Appeals Court in last week’s ruling.

Formal publication of the proposed rule in the Federal Register will open a 45 day comment period. One can expect the formal comments EPA receives, as well as those to be voiced online and elsewhere in the court of public opinion, to follow predictable lines. Biofuel opponents will likely challenge the 14 million gallon cellulosic volume mandate, as well as the fact that the mandates continue to require substantial amounts of corn-derived ethanol (the difference between the 16.55 billion gallons of all renewable fuels and the 2.75 billion gallons to come from advanced biofuels would be expected to be derived almost exclusively from cornstarch ethanol). In particular, one can expect a vigorous challenge to the cellulosic mandates from the American Petroleum Institute and its allies who have opposed EPA in the various lawsuits that have challenged the RFS and the cellulosic mandates.

It’s also interesting that EPA has largely stuck with its methodology for estimating the cellulosic volume mandate, albeit with a bit more caution, in spite of last week’s Court decision, because I had expected EPA to take a much more cautious approach in the wake of that decision. This could be a signal that EPA believes its approach to the cellulosic mandate is appropriate and consistent with the law, and that the agency intends to appeal last week’s decision.

Proposed 2013 RFS Volume Mandates.

Category

Volume (gallons)

% Standard

Cellulosic biofuel

14 million

0.008%

Biomass-based diesel

1.28 billion

1.12%

Advanced biofuel

2.75 billion

1.60%

Renewable fuel

16.55 billion

9.63%

RIN Validation

Also on January 31, EPA issued a second proposed rule which it says would “provide a structured process for buyers of Renewable Identification Numbers (RINs) … to verify their validity.” Under the RFS, RINs are the identifying numbers that are to be created when qualifying renewable fuels are produced, and which are used by obligated parties to meet their annual volume obligations under the law. As I have previously reported, EPA has been developing such a plan as a response to the 2012 discovery that several entities had issued RINs that did not correspond to any existing fuels, thus fraudulently benefitting from the economic value of the RINs without actually producing fuels. EPA is proposing that RINs be verified through a voluntary quality assurance plan under which third parties would establish programs to audit and verify RIN validity. The proposed rule is based on a Draft Quality Assurance Plan that EPA published in late October 2012, which I described briefly in a previous post. EPA has set a 30-day public comment period on this proposed rule, also to begin on formal publication in the Federal Register.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ regulatory affairs consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels.